One proposed solution to prevent dangerous climate change is the carbon market, “a market created from the trading of carbon emission allowances”. Can the trading of emission permits help pave the way to a low-carbon future? Could the pricing of carbon aid a global transition to renewables? Or is the concept of a carbon market another example of neoliberal hegemony, a capitalist attempt to profit from disaster?

The Origins of Carbon Markets

One of the first markets in emissions trading was the Acid Rain Program in the USA in the 1990s. This was introduced in a market-friendly attempt to reduce the emissions from coal-fired power stations and prevent occurrences of acid rain after previous government legislation had failed to address the problem. The successful 10% reduction of sulphur dioxide emissions between 1995 and 2003 seemed to vindicate the idea of market environmentalism, and encouraged the insistence of market mechanisms in climate negotiations.

The US delegation and the 1,500 lobbyists from the International Emissions Trading Association helped cement the use of market instruments in the 1997 Kyoto Protocol. US Vice President Al Gore advised that the US would only agree to the Protocol if the trading of pollution rights was implemented. Even though the US refused to adopt the Protocol it strengthened the concept of market environmentalism. Since then the design and development of carbon markets has predominantly fallen into the hands of financial market architects, with emissions trading becoming “almost unstoppable”.

Due to the inequalities of purchasing power and wealth transfer, the idea of markets ushering us into a low carbon future seems impossible. The control of our atmospheric commons will remain out of our hands, and the state will step in if resistance emerges. Neoliberalism has always used violence via the state to secure property rights, enforce stability, and quash dissent – carbon markets are no different. An immaterial commodity like carbon requires state intervention for a market to be enforced and regulated.

Carbon markets have also been wracked with crime. A reliance on corporate self-regulation has encouraged “climate fraud”. INTERPOL in 2013 released the “Guide to Carbon Trading Crime”, detailing carbon market-associated money laundering, insider trading, and cybercrime, and explaining how the capacity to falsify information or receive bribes has been found in regulatory institutions of all kinds.

“The global carbon budget to avoid dangerous climate change is too small to allow trading. If a temperature target of 1.5 degrees is chosen with a reasonable to high chance of avoiding it, then the global carbon budget will be tiny. Carbon trading relies on countries having ‘spare’ carbon emissions … Under a tiny carbon budget it is almost certain that no country will have any spare emissions to sell.”

Carbon trading also ignores fossil fuel consumers that cannot be subsumed under markets – the US military for example, potentially the world’s largest consumer of petroleum, would hardly accept a carbon price as it released almost 60 million metric tons of CO2 in 2011.